BOP Theory of Exchange Rate
Category: Economic Conditions
Macroeconomics
According to Economypedia, “macroeconomics is the study of ‘big picture’ economics that relates to countries, regions or organisations as a whole, rather than individuals or families. It analyzes economic principles as related to unemployment, inflation, industry, and government.”
Theory of Exchange Rate Determination
Theory of Exchange Rate Determination can be explained using different approaches. In the following section we have dealt with some of them.
Recession
Recession is the overall slowdown in the economic activity of a country/geographic area extending over a sustained period. While some experts define recession as an economic slowdown that lasts for more than three months, others take the timeframe as six months. A ‘Technical Recession’ is normally defined as two consecutive quarters of declining GDP or negative GDP growth. All the measures of production, such as Gross Domestic Product (GDP), employment, investment spending, capacity utilization, household incomes and business profits fall during this phase.
Depression
Economic depression is a severe and prolonged period of downturn. For a downturn to be classified as depression, the generally accepted definition calls for a decline of at least 10% in GDP and for a period of at least three years. Typically, depression is characterized by a sustained and significant shortfall in purchasing power.
Some characteristics of depression are:
- abnormal rise in unemployment
- fall in output and investment
An Introduction to Game Theory
An Introduction to Game Theory comprises information on the concept of Game Theory, its application and the various forms of games that the theory propounds. It is basically a theory of strategies where the agents indulge themselves in choosing the right combination of action to maximize the profit at the end of the game. These agents interact among themselves in the given situation. The situation normally is a conflicting one.
Game Theory in Supply
Game Theory in Supply has been successfully used for quite some timed now. The game theory has gained a lot of emphasis and has become a necessary tool for analyzing the supply chains with multiple agents whose objectives are different. Both cooperative and non-cooperative strategies are employed in dynamic and static settings.
There are various game strategies that are applied in the supply chains. Among them the most famous happens to be the prisoner’s dilemma. This strategy involves lots of moves and is a kind of non-cooperative game.
Theory of Labor Supply
The Theory of Labor Supply defines the supply of labour as the number of workers willing to and able to work for a specific wage rate in a given industry.
